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SoftBank Group’s stock surged to a record high on Thursday, marking its first peak in 24 years. The company’s resurgence is attributed to its tech investment arm’s recovery and the public market success of British chip designer Arm, in which SoftBank holds a majority stake.
Key Highlights:
- Record High: SoftBank shares closed at 11,190 Japanese yen, surpassing previous peaks from the dotcom era and recent tech downturns.
- Historical Context: Founded in 1981, SoftBank’s stock peaked at 11,000 yen in 2000 during the internet boom. However, it fell more than 90% during the subsequent dotcom crash.
- Recent Recovery: SoftBank exceeded its previous record high in February 2021, but faced significant declines in 2022. The company’s stock began recovering in May 2023, aided by improved financials and a focus on AI.
Vision Fund and Investment Strategy:
- Vision Fund Launch: In 2017, SoftBank launched the Vision Fund, investing heavily in tech startups globally. While some investments, such as in WeWork, faltered, the fund has seen renewed success with a shift towards AI.
- Financial Volatility: The Vision Fund experienced a record $32 billion loss in 2023, leading SoftBank to adopt a more aggressive investment stance in AI.
Arm’s Impact:
- IPO Success: SoftBank’s stake in Arm, which it acquired in 2016, significantly boosted its stock price. Arm’s shares have risen nearly 124% in 2024.
- Arm’s Role: SoftBank owns about 90% of Arm. The chip designer’s success reflects SoftBank’s strategic investment in semiconductor technology and AI.
Market Valuation:
- Valuation Discrepancy: SoftBank’s market valuation stands around $101.5 billion, while Arm’s market cap is approximately $176 billion. SoftBank’s stake in Arm alone is valued at $158 billion, exceeding SoftBank’s total valuation.
- Analyst Views: Some analysts argue that SoftBank’s stock price does not fully reflect the value of its assets. The company’s discount compared to its fair value might narrow as AI investments mature.
Future Prospects:
- AI Ambitions: Masayoshi Son, SoftBank’s founder, has expressed grand ambitions for AI, including the development of artificial super intelligence (ASI) that he envisions to be 10,000 times smarter than humans.
- Broader Market Trends: SoftBank’s rise is also supported by a broader increase in Japanese stocks, with the Nikkei 225 Index up 22% this year.
Investor Sentiment:
- Mixed Reactions: While SoftBank’s investment in AI and its stake in Arm have driven recent gains, some investors remain skeptical about the company’s overall valuation. The stock’s rise is seen as largely driven by Arm’s success and broader market trends rather than SoftBank’s standalone performance.
SoftBank’s current trajectory reflects a strategic pivot towards AI and technology investments, with its founder’s bold vision potentially shaping the company’s future growth.